Trade data triggers US growth rethink

While trade was still a drag on the economy, rising exports made it less of a drag than in 2012 than in prior years. Exports totalled $US2.19 trillion v imports of $US2.74 trillion.
Photo: AP

by
Jason Lange

The US economy likely expanded slightly in the fourth quarter as higher exports and a slump in oil imports narrowed the trade gap, suggesting a surprise drop in economic output reported last week was overstated.

That suggests trade added to economic growth in the final three months of last year, rather than holding it back as the government said last week when it estimated gross domestic product fell at a 0.1 per cent annual rate.

The GDP report had shocked economists, who had been looking for the economy to expand at a 1.1 per cent pace.

‘REASSURING PICTURE’

"Trade data for December paint a reassuring and encouraging picture of the US economy at the end of last year," said Chris Williamson, chief economist at Markit.

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Taken together, the reports pointed to an economy that was still growing at the end of the year, and was poised to grow at a quicker pace in early 2013 as firms rebuild inventories to keep up with demand.

Macroeconomic Advisers, a forecasting firm, said the data pointed to a growth rate of 0.5 per cent in the fourth quarter.

JPMorgan economist Michael Feroli said the decline in inventories helped lead him to boost his forecast for first quarter GDP growth to a 1.5 per cent annual rate - a still-tepid pace that would reflect the hit most Americans took in January from higher taxes. Feroli and other economists expect growth to pick up as the year progresses.

IMPORTS DECLINE

The US report showed the country's trade gap narrowed to $US38.5 billion in December, which was a much smaller deficit than analysts polled by Reuters had expected.

US exports increased $US8.6 billion in December, boosted by sales of industrial supplies, including a $US1.2 billion rise of non-monetary gold.

In a reflection of America's current oil and natural gas boom, petroleum exports rose by nearly $US1 billion to a record high level.

A fall in petroleum imports led overall purchases from abroad to decline $US4.6 billion in December. Both the price per barrel and volume of imports fell, although those data are not adjusted for seasonal swings.

For the entire year, the country's imports of crude oil fell to their lowest levels since 1997 in terms of volume.

CHINA IMPORTS STILL RANKLE

For all of 2012, the US trade gap fell by 3.5 per cent to $US540.4 billion as exports rose 4.4 per cent. While trade was still a drag on the economy, rising exports made it less of a drag than in prior years. Exports totalled $US2.19 trillion v imports of $US2.74 trillion.

While the overall deficit shrank last year, it grew with China, raising the hackles of US manufacturers who feel Beijing gives its exporters an unfair edge by keeping its currency undervalued.